Imagine pouring all your resources on a given project; spending endless hours on getting the best business ideas. Then, when you think you have the attention of a potential investor for your startup, they pull out. And the worst part, they sign the contract with your closest competitor. It’s heart-wrenching. Thankfully, such an occurrence is avoidable if you stay clear of common mistakes that cause angel investors to walk away from a somewhat killer deal.
This post lets you know three reasons why an investor might refuse to sign that contract for the presentation you are about to make.
You’ve not researched adequately
Typically, an angel investor wants you to convince them to invest in your business. In many cases, they aren’t conversant with what goes on in that industry or business. They depend on the details you give them during presentations. Imagine the disappointment they will face if they realize that you’ve not done your homework.
Prepare ahead of time to answer all the questions prospective angel investors are likely to ask. Have sufficient information about your target market, competitors, and other critical aspects of your startup. Invest time to perform adequate research before pitching angel investors. Seek help from other entrepreneurs and mentors. You could even practice your pitch multiple times before them. Doing so will allow you to think about the possible questions and how best to respond to them to guarantee a signed contract. Don’t rush to pitch until you feel that your business model and pitch are superb.
The investor detects untrustworthiness
If an angel investor detects the slightest presence of dishonesty, they will pull out no matter how good your deal is. Does your business entail misleading people knowingly? It could be something as silly as pretending to know things, yet you don’t, or implying that you have other investors, yet you don’t. Providing half-baked information deliberately to cover up weaknesses or something that you don’t want the investors to know could also land you into problems.
No one wants to deal with a dishonest individual, especially where money is involved. During your presentations, do everything possible to come out as a truthful and dependable entrepreneur. If there is a problem with your startup, be straightforward with your angel investor. You might be surprised that they don’t consider it a problem, or better still, they could help you get a solution.
Unreasonable projected expenses
Angel investors put your projected expenses under tight scrutiny. Does your business model place heavy reliance on external sales? Have you omitted essential expenses such as legal expenses? If yes, you need to go back to the drawing board. If you pitch your model now, your angel investor will conclude that you are green at investing, so you don’t deserve their attention.
But greed is even worse. Is a six-figure salary part of the projected expenses? Avoid a me-first scenario as it can be bad for business. For starters, no angel investor will accept to pay for your six-figure salary or unreasonable commissions. Secondly, this approach will cause you to lose talented employees. Thirdly, your greed will lead to lousy margins, and things might not end well. Lead by example as the CEO. Show the rest a hunger for commitment and sacrifice to see the business grow. Quit focusing on short-term goals as they might deny you long-term rewards for you, your workers, and the investors.
These are just three primary reasons why a promising angel investor might walk out on a good deal. Keep them in mind and consider many others to ensure that your business gets the much-needed funding.